Gas prices likely to stay high across Chicago area

AAA: Gallon of regular unleaded costs about $4 — up 50 cents from a month ago

February 13, 2013|By Samantha Bomkamp, Chicago Tribune reporter

Carolina Villar pumps gas this month in Miami as fuel prices hit their highest level for this time of the year. (Joe Raedle/Getty Images)

A painful rise is gas prices isn't expected to abate any time soon.

The average price of a gallon of regular unleaded in the Chicago area is up 50 cents from a month ago, to $4.08 in the city and $3.93 across the metro area, according to AAA. And in both markets, prices have jumped about 10 cents a gallon in the last week alone.

It's a similar story nationally, although the increases haven't been as dramatic: A gallon of unleaded now costs $3.60, up about 7 cents from a week ago and 30 cents higher than this time last month. The average U.S. price could rise as high as $3.73 a gallon in May, the U.S. Energy Information Administration predicted Tuesday.

Energy analysts say it's not typical to see gas price spikes at this time of year. Demand is typically low and picks up in the spring before driving season. And in general, gas is cheaper to produce in the winter because refineries can use less expensive blends.

For the city and metro area, prices are roughly 30 cents higher than a year ago, when gas prices were marching toward an all-time high set in March.

Sharply higher crude oil prices are driving the surge. From a price of $85 a barrel in December, the commodity has risen to about $97 now. Improving economic certainty as the country moved past the election and the "fiscal cliff" deadline are two big reasons for the uptick, according to energy analyst Phil Flynn. Another factor is better-than-expected growth in China, the world's second-largest economy.

Prices in the Chicago area are typically some of the highest in the nation. Gregg Laskoski, a senior petroleum analyst at GasBuddy.com, says that's the result of a combination of stable metropolitan-area demand, a relatively low number of suppliers and taxes. Illinois drivers pay about 57 cents a gallon in taxes, compared with 40 cents in Iowa or 35 cents in Missouri. New Yorkers pay the most, at 69 cents a gallon.

Flynn attributes the sharp pickup to a number of refinery issues in the region. Some scheduled maintenance at refineries — where gasoline and other products are produced from oil — occurred earlier than usual, which cut off some supply and affected prices. Many close at this time of year to start the switchover to lower-emission summer blends of gasoline.

Besides a major overhaul of BP's Whiting refinery, the largest supplier of gasoline to Midwestern markets, that's believed to be driving prices higher, a fire temporarily shut down a refinery in northwest Ohio.

AAA, which tracks daily gasoline prices around the country, predicts they will continue their rapid climb as local refinery issues continue into the beginning of peak driving season, which begins in May.

Flynn is more optimistic. He believes that once the Whiting refinery overhaul is complete later this year, gas prices will stabilize.

"I'm probably in the minority, but I think we are starting to see some light at the end of the tunnel," he said.